Posted on May 16, 2011

Should Franchisors Develop a Best Practices List?

Should franchisors develop a Best Practices List?

You betcha! (guess I’ve heard too many Sara Palin sound bites) -- and franchisors should also share it with their sales personnel, operations staff, executives and, well… everyone. In fact, the Best Practices List (BPL) may be more important than the proverbial, ubiquitous (and ever nebulous) mission statement.

But why is the Best Practices List so important, and how can one go about developing a BPL?

We all get lost in the details, focused on the task at hand. We need guideposts and a BPL can keep franchise systems on track. I say it's more important than a mission statement because those things are largely conceptual, seldom updated, and quickly become drab wallpaper to which no one pays much attention. A BPL, on the other hand, should be a fluid, dynamic text that has practical, specific application on a day-to-day basis. Involvement in its development should come from all ranks.

While I cannot develop your BPL, here are a few suggestions that I would offer based on my experience in the franchise arena:

We should make sure that prospective franchisees have everything they need to make an informed and intelligent decision when they look to buy a franchise. This is not only good business; it's also great legal protection. Give buyers every possible piece of information that the law allows. Of course, avoid anything that is an exaggeration or incorrect, and refrain from making franchise financial performance representations unless they are contained in FDD Item 19. Be honest and arm potential franchisees with all necessary and important information as they are in the process of exploring franchise opportunities.

We should encourage franchise buyers to work with knowledgeable counsel. This allows buyers to come into the deal with their eyes open with guidance from their own counsel. Once again, this offers great legal protection for franchise sellers: if a problem arises later in court or arbitration, the presence of franchisee-counsel should nullify any claims of unconscionability that may be otherwise available to an unrepresented buyer.

Our sales staff should be well-educated on proper sales procedures required by state and federal law. The one area that gives dissatisfied franchisees the greatest leverage is a flawed sale. While it is generally difficult for franchisees to prevail on straight-up “breach of contract” claims concerning a franchisor’s post-sale services, pre-sale violations (FDD disclosures and timing and state law nuances) can be used an effective wedge for troubled franchisees. In addition, handling sales correctly will avoid the unwanted attention of state and federal officials. For a great sales guide, consult my friend Warren Lee Lewis’s The Franchise Seller’s Handbook.

We must listen to and communicate with our franchisees. I have often heard that lack of communication is one of the biggest problems in business. And, for a franchise system, communication is paramount. Active listening – developing genuine interest in the ideas and concerns of your franchisees – will solve many a problem. Stay in touch, develop a culture of inclusion and reward meaningful input.

There are many other best practices we could list but it’s your BPL, so you can take it from here …

Oh yeah, trash the mission statement while you are at it.

For an electronic copy of the aforementioned handbook, people can go to www.akerman.com, Practices, Franchise & Licensing, and HANDBOOK (at the bottom left on the Franchise & Licensing page).

Jim Meaney is a lawyer with Zaino & Humphrey, LPA in Columbus, Ohio who has represented franchisors and franchisees for nearly 30 years. Jim is a co-author of “Starting a Franchise System: Practical Considerations, Planning and Development,” American Bar Association Forum on Franchising, 2010 Annual Forum (October 2010). He is also the author ofHow to Buy a Franchise. Visit www.fddlawyer.com or www.ohiofranchiselawyer.com for more information or contact Jim directly at 614.975.9876 or jmeaney@zandhlpa.com.